Latest Comments From SK Hynix Offer Key Data for Nvidia, Three Other Holdings

Earlier on Thursday, Korean memory company SK Hynix HXSCF reported its December quarter results and served up its outlook for the coming year. Much the way we pay attention to end market comments made by Micron MU and others, and what they mean for the Portfolio’s holdings, we’re doing the same with SK’s December quarter results that climbed 12% sequentially and 75% year over year.

December quarter revenue strength was largely due to demand for AI memory products and data centers, reflecting significant demand for those products compared to PC and smartphone memory ones. Helpful for sure, but it was SK’s comments about the coming year that were far more constructive as we move deeper into the current earnings season with many companies yet to report:

"The demand growth momentum for AI memory products that began in 2023 is expected to continue to be the driving force behind this year's market growth… investments in AI servers are expected to continue expanding for the foreseeable future."

That serves as another data point that supports our positions in Nvidia NVDA and Marvell MRVL.

The next set of data points to watch following SK’s comments and the Stargate AI announcement earlier this week will be capital spending comments from Big Tech companies when they report next week:

"PC shipments this year are expected to grow by low to mid-single digit percent, driven by corporate PC replacement demand from end of support for Windows 10, as well as effects from AI PC shipments kicking in. AI PC penetration is expected to reach around 30% to 40%"

This backs other forecasts we’ve seen for AI PC adoption amid an overall PC market that will be up modestly year over year. In today’s video, we discussed the ability of technology adoption to drive faster growth for companies despite more modest growth in an end market. We see that playing out not only with Universal Display OLED with organic light-emitting diode displays but with Qualcomm’s QCOM AI PC efforts.

"The smartphone market is expected to grow by a low to mid-single digit percent, similar to last year's level. The penetration of AI-enabled smartphones is expected to grow to approximately 30%..."

Here, SK’s comment suggests AI will help foster a replacement cycle in the smartphone market, which has been our thinking. We continue to think smartphone companies will need to deliver more robust AI solutions to drive that upgrade cycle, which means paying attention to software updates from Apple and Android and feature announcements from them as well as Samsung and others.

SK’s forecast for AI-enabled smartphones to reach 30% of smartphone sales also supports our thinking that adoption will drive far greater data consumption, leading to incremental network spending. As we’ve discussed many times, that would bode well for Marvell’s non-AI/data center business.

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At the time of publication, TheStreet Pro Portfolio was long NVDA, MRVL, OLED and QCOM.